What is the Central Provident Fund (CPF)?
The Central Provident Fund (CPF) is a compulsory and comprehensive social security savings scheme, funded by contributions from employers and employees to help citizens and permanent residents fund their housing, healthcare and retirement needs in Singapore.
It comprises of 4 main accounts:
- Ordinary account — for housing, insurance, investment and education needs;
- Special account — for retirement or retirement-related investment needs;
- Medisave account — for healthcare needs; and
- Retirement account (aged 55 and above) — for retirement payouts.
Employers and employees make monthly contributions to the CPF Board, which goes into these accounts.
The government also helps to supplement the CPF savings of lower wage workers, through schemes like Workfare Income Supplement (WIS) scheme and MediSave top-ups for senior citizens.
Why is the Central Provident Fund (CPF) important?
CPF is aimed at helping Singapore citizens and permanent residents set aside sufficient funds to ensure a good foundation retirement.
It is targeted at satisfying three basic needs in retirement so everyone can have a greater peace of mind:
- A fully paid-up home
- Insurance and savings for healthcare
- A steady stream of lifelong retirement income
As you work and make CPF contributions, your savings are accumulated — and at age 55, a Retirement Account is created for you, by combining your savings in your Ordinary and Special Accounts. You can withdraw a one-off lump sum from your CPF savings when you turn 55, and start receiving regular monthly payouts from your CPF savings when you turn 65.
What are the Central Provident Fund (CPF) contribution rates for employers and employees?
CPF contribution rates range from 12.5% to 37% of an individual’s monthly wages, depending on their age. The CPF contribution rates for employees aged above 55 to 70 will be increased from 1 January 2023, to strengthen retirement adequacy.
The new rates are:
For employees aged 55 and below, employer contributions will be 17% of their wage while employee contributions will be 20% of their wage.
For employees aged 55 to 60, employer contributions will be 14.5% of their wage while employee contributions will be 15% of their wage.
For employees aged 61 to 65, employer contributions will be 11% of their wage while employee contributions will be 9.5% of their wage.
For employees aged 66 to 70, employer contributions will be 8.5% of their wage while employee contributions will be 7% of their wage.
For employees aged 71 and above, employer contributions will be 7.5% of their wage while employee contributions will be 5% of their wage.
Need help with complicated Central Provident Fund (CPF) calculations?
Payroll can be incredibly complex and time-consuming when you’re dealing with so many different CPF calculations. Employment Hero is an all-in-one HR and payroll software that is IRAS-compliant, and can help you streamline CPF calculations and other components like SDL deductions, so you can feel confident each pay run.
For more helpful tips, check out our payroll guide, HR compliance guide, or guide to hiring employees in Singapore.
Keen to find out more? Book a demo with us today!
Disclaimer: The information in this article is current as at 31-Oct-2022, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related corporate bodies (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified, and no warranties are given that it is complete, accurate, up-to-date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.
